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Workers Compensation Audits Five Types To Cut Comp Costs

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Workers Compensation Audits – Five Types For Cost Savings 

We often receive questions centering on Workers Compensation audits.  Audits – we like to call them reviews are an essential method to cut comp costs.

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This term may cover many types of audits or reviews. I thought I would cover the top 5 types performed for employers on a regular basis in order by popularity.

They are:

Premium Audits – this is basically an examination of the mechanics of how your Workers Compensation premiums were calculated by examining your policies, endorsements, yearly premium audits, and other pertinent materials.

E-Mod Audits – this type of audit recreates the mechanics of how your Experience Modification Factor was calculated. This can be very important to employers as the E-Mod has a major impact on premiums.

Claim Audits -a predetermined set of best practices for claims handling are established – usually using the carrier’s or TPA’s claims manual. The Workers Comp claims are reviewed thoroughly to ensure the claims adjusting and supervision staff is performing at an acceptable level. Currently, we use 31 – 33 areas to examine the claims. Trends are analyzed and reported using our copyrighted reporting methods. This is a very critical area for self insureds.

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Reserve Audits – can be done during claim audits or standalone. An analysis is performed for over/under reserving of the Workers Comp files. This is especially important for nonself insureds as the E-Mods are calculated directly from the Total Incurred of each file.

Subrogation Audits – money is often left on the table when subrogation has not been addressed in all of the Workers Compensation files. As I wrote in this article, Workers Comp adjusters may not be that heavily trained in liability adjusting. That is the nature of the business. Automobile accidents are a major concern in this area.

There are two caveats to consider in these Workers Compensation audits. Picking out one or two mistakes by an adjuster and inflating their importance is a waste of time and $$$. Trends should be analyzed in most cases. The other caveat is very few companies can do all of these services in-house without having an anonymous subcontractor assist in the audits. I do not want this to be a shameless plug for J&L’s services.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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